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Local services companies unfazed by HP/EDS merger

Local services companies unfazed by HP/EDS merger

Local companies are taking a business as usual view

Local integrators and outsourcers are playing down the impact of a possible merger between HP and EDS on the IT services market.

Last week, HP announced a deal to acquire IT outsourcer, EDS, for $US13.9 billion. Media reports suggested this is a play to overtake IBM in the $16.9 billion Australian IT services market.

However, IBM maintains the greatest market share - just over 13 per cent - and local companies are taking a business as usual view.

"I think it will have little consequence for our business here in Australia," Datacom CEO, Michael Browne, said. "I don't really feel it will play out for or against us."

While the pairing might make a bigger player, Browne noted this can be a challenge when chasing smaller contracts.

"I think the objectives of the acquisition are more oriented towards Europe and North America. So I don't really look at it as any significant change or shift in the market here at all," he said.

Many observers also pointed out mergers and acquisitions activity within the integration and outsourcing space has been on the cards for some time.

"We have been saying for some time that there will be some level of consolidation in the industry," Fujitsu A/NZ CEO, Rod Vawdrey, said. "I think that this world we live in today is a world of co-opetition. We have several business relationships with EDS even though we compete with them. And we have very strong relationships with HP even though we compete with them. I would predict that it may have some small impact in terms of having another tier-one player that is actively in outsourcing."

While IBM declined to comment IBRS analyst, Alan Hansell, believed its number one position will not be threatened by the new merger.

"I wish them [HP and EDS] well in their attempt to get into the number one slot," he said. "But I think that is a tall ask."

Hansell acknowledged EDS' strong capabilities in technical and infrastructure services but claimed it will still face obstacles developing a full services model even with HP. "HP has also not been strong in that market," he said. "It is a complex market when you are servicing applications and I question how they will get to IBM's dominance."

And while on paper the merger looks to set HP on the right course to challenge IBM, other hurdles may arise.

"My understanding is that they are two quite different cultures," Hansell said. "HP has more been renowned in the past as a more flexible organisation, innovative. EDS came out of the US military.

"HP must bring about a major cultural change within EDS to make it a more innovative organisation."

According to other players in the market, the merger also presents an opportunity to snap up new positions.

"From our perspective in the local market there is one less big choice for customers," Dimension Data solutions and services director, David D'aprano, said. "That potentially leads to opportunities for us where clients may be looking for partners. Potentially it opens it up for people like ourselves who want to focus on specific service offerings whether it be at the upper enterprise or mid-market."

A local EDS spokesperson said it was too early to know details of the merger's impact on local operations and staff.

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